WisdomTree: Gold may climb to $1,400/oz in near term

Sep 7th, 2017 | By | Category: Commodities

Gold ETPs could be set to benefit from a spike in the gold price, according to new market commentary from WisdomTree. Nazim Hamid, ETF strategist at WisdomTree thinks the spot gold price could climb as high as $1,400 in the near term, due to political uncertainty and increased interest from hedge funds.

Gold could hit $1,400 says WisdomTree

Hedge funds have bought 474 tonnes of gold in the last five weeks.

A gold price of $1,400 would mark a four-year high for the precious metal, which broke above $1,300 for the first time in almost a year last week amid increasingly provocative military actions from North Korea.

Hamid said: “There is a combination of events driving gold higher, including both political uncertainty and hedge fund buying. If these political circumstances continue it could drive the price to $1,400.”

Hedge funds have recently increased their positions in the safe haven asset, with a record $19 billion of gold futures snapped up in the past month.

Gold is a natural hedge to uncertainty around the globe, climbing as investors de-risk portfolios. However, it remains a long way off its previous peak above $1,900 seen in 2011 at the height of the eurozone crisis. Hamid said it remained one of the simplest and most liquid ways to hedge risk.

However, while hedge funds have returned to gold, mainstream investors continue to shy away from the metal, causing net outflows from gold-backed ETPs of around 35 tonnes in the last five weeks despite the purchase of 474 tonnes by hedge funds in that time.

Hamid said, “Given where valuations are for other asset classes, there is a real potential for gold to continue to rally, especially if mainstream investors get in on the trade.”

The largest European-domiciled ETP offering gold exposure is the ETFS Physical Gold (LON: PHAU), which was launched in April 2007 and has assets under management of $6.3bn with a management expense ratio of 0.39%. The cheapest is the db Physical Gold ETC (LON: XGLD), which was launched in June 2010 and has assets of $754 million with an MER of 0.25%.

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